State hospitals want quick answer on controversial tax

Published 7:54 pm, Monday, February 8, 2016

Connecticut hospitals want the state to decide sooner rather than later on the constitutionality and legality of the state’s controversial hospital tax.

The Connecticut Hospital Association and 24 hospitals, including Danbury, Bridgeport, Norwalk, Stamford and Greenwich, filed documents last fall requesting the state departments of revenue and social services issue declaratory rulings that the tax is invalid and unenforceable — a key step toward a possible legal battle with the state.

The state had 60 days to respond and did so in a five-page letter last week, asking for an extension to rule by Nov. 30. If the hospitals declined, the state said, it would rule by May 28.

“After speaking with our clients, we believe we can meet the shorter schedule for a declaratory ruling,” said Ronald W. Zdrojeski, an attorney representing the hospitals, in a Feb. 4 letter to the state.

“Candidly, as the Hospitals continue to be subject to a tax burden of $139 million a quarter and are receiving virtually none of the payments they are due, we believe a prompt ruling on our request for a declaratory ruling is in everyone’s interest,” Zdrojeski said.

Connecticut hospital officials and advocates have repeatedly said the way the hospital tax is administered is costing them millions of dollars and forcing hospitals to cut services and staff.

The governor and state officials have countered by shaming health care executives over their multi-million-dollar salaries and the hospitals’ profit margins, and by noting the increasing Medicaid payments going to the hospitals.

“There are no significant reductions in Medicaid reimbursements or supplemental payments to hospitals compared to last year, when the hospitals received in excess of $2 billion,” said Chris McClure, a spokesman from Gov. Dannel P. Malloy’s office, in an email.

“Like everyone else, hospitals are going to have to understand the new reality where we can't budget based on what we want to spend, but instead have to budget based on what we actually have,” McClure said.

The state began collecting the tax in 2012, intending to redistribute the proceeds to the hospitals as a way of drawing down matching federal grants. That year the hospitals paid about $350 million in taxes and received about $400 million in state and federal funds.

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But when the state began experiencing severe budget pressures, it started returning less and less to the hospitals. This year, hospitals are projected to owe $556.1 million in taxes but are slated to receive only $164.3 million.

The payout could have been even less. In September, Malloy slashed the state budget, cutting the amount going to $64 million. A December budget deal arrived at the $164.3 million figure.